Wilsonville, Oregon Real Estate Forum

98 Replies

I figure with having to get my GC and Developers license, and I'm not sure yet but possibly my Real Estate Agent/Broker and then the cost of acquiring properties the added legal protections would be good to have. Obviously, you just work it as part of the #'s and as long as you're accounting for everything if the numbers work they work. I'm just not clear as to what those #'s are. @Brian Bradley do you have your agents/brokers license? @Jay Hinrichs do you think I need one to be succesful? 

@Jay Krietzman yes I also have my brokers license, but I use it passively. I don't show properties etc. I was just leaving passive money on the table without it. So I got it.  I personally don't think its needed to be successful. Tons of investors are not brokers but have other jobs and life's. they just invest. If your goal is to develop then maybe depending on your business plan. If you plan to develop and sell yourself and save on commissions. 

Originally posted by @Brian Bradley :

@Jay Hinrichs starting an LLC does not take all their liquid cash. New investors will be getting loans. $2,000 for an LLC and Trust will not stop them from getting the deal done and closed. The coordination is just budgeting their money and yes getting a deal, but then if you own something you are a target and a contingency lawyer will sue you to get the plaintiff's money and take your property and force a sell for the judgment.

Thats the problem with the modern legal system letting anybody file anything and Attorney's now taking cases on contingency. Nothing to loose for predatory lawsuits. Slip and fall, trip over a root whatever, the dumbest things people sue over and now you have a negligence suit to fight. And BK follows you for years and will stop a new investor dead in their tracts. $180k investment properties are easy to find and at 5-20% down that 9-36k. Most will partner with somebody on their first deal. So 2.5k-10k, they can then use that 2k in the saving to get set up properly and know they have something to limit their liability so they sleep better and not be in fear. At the end of the day its an ease of mind thing. 

Brian I get it totally.. I have 12 LLC's or more.. and all other manner of licenses etc etc.. and in Oregon I now have 3 developers licenses and counting.. I let my brokers license to on Ice since my wife handles all our properties.. I don't really need it .. I keep my CA one going though for business I do there.. and referral income.. My mortgage banker license is on Ice.. but if I get back into that I can fire it back up.. we just get licensed to death these days..

However I will say and as someone who has been in a few transactions over the years.. if you do get sued I don't care what the set up is your going to get named personally.. now to defend that you should not be sued is going to cost you a bunch as you know.. 

End of the day I have never had a lawyer take a case in anything I was involved with on contingency though.. but I have not been in any cases that were related to injuries were there might have been insurance..  just business contract disputes.. were we all pay for our own and they all get settled.

Do you find it to be a hassle that your buyer/seller knows your an agent/broker? Does that cause trust issues? Seems like that's the main reason why people preach against it.

@Jay Krietzman no. Never had an issue . Mine is with my law license. Some people buyers/sellers have biased against lawyers so one I disclose which I have to do they just walk away. But I don’t care about bias. Their loss.
@Brian Bradley a llc is a pass through entity. It doesn’t have a “lower tax rate”

hence lower tax rate vs not having one. Go do a simple basic search on tax benefits and rates of LLC and if you elect to be taxed as an S-Corp their you go @Steve B. and no self-employment tax rate now for not being incorporated. Just sayin Steve. Yes you do get lower tax rate for LLC electing to be taxed as an S-corp and then not paying all the self-employed taxes. Talk to your CPA and lawyer. 

@Steve B. The IRS allows the LLC to be taxed as a corporation, partnership or sole proprietor, depending on elections made by the LLC and the number of members. Elect to be an S-Corp for taxes. Just saying! 

@Steve B. do you need to understand how setting up an LLC works. You must elect when you set it up how you want to be taxed. Have your lawyer and CPA do this for you. YES, LLC then you must CHOOSE how to be taxed when you set it up. If you do not, then you have an LLC that then will have pass through tax and not be set up very properly. Hence why you have CPAs and lawyers BEFORE you do anything.

@Brian Bradley glad you clarified that and spoke about electing a s-corp for a LLCbecause your original post indicated that a LLC puts you in a lower tax bracket. This is a misunderstanding a lot of new investors make.

@Jay Hinrichs your new logo looks like a potential prototype for Hillary in 2020

@Steve B.  good for pointing it out to make sure its clarified. When somebody ask me questions on any forum its general. I then follow up with them personally for a full detailed analysis which if they want which is not the place on a public forum. Any attorney they talk to and CPA should / would advise them on how to set it up. 

@Brian Bradley this is some great discussion on legal entities thank you for all the information. You are licensed in Washington as well right? Do you know if forming an LLC there will actually cause you to pay more in taxes? (no state income tax but there is a business and occupation tax if I understand it correctly)

Originally posted by @Jay Krietzman :

Do you find it to be a hassle that your buyer/seller knows your an agent/broker? Does that cause trust issues? Seems like that's the main reason why people preach against it.

 the main reason gurus preach against the license is simply GREED.. they think if your not licensed you can take unconscionable profits and be OK..  IE tell someone their 300k property is only worth 100k  flip  it the same day for 200k  that type of thing.. when in fact and I am sure Mr. Bradley can attest anyone can get sued for this license or not... that's again the misconception of wholesale guru's.

Originally posted by @Steve B. :

@Brian Bradley glad you clarified that and spoke about electing a s-corp for a LLCbecause your original post indicated that a LLC puts you in a lower tax bracket. This is a misunderstanding a lot of new investors make.

@Jay Hinrichs your new logo looks like a potential prototype for Hillary in 2020

NOpe just raising money as a charity to put a first responder into a home free and clear.. and hoping all these successful real estate folks on BP will join in on the mission.. that's my BP mission going forward.. CHARITY.  First responders Hero's  provide them a home free and clear.. and let the real estate community be proud sponsors..  

In regards to Series LLC's and states that recognize them or not, we have discussed that the issue comes down to each specific state recognizing the "internal liability shield."

For the State of Oregon recognizing internal liability shield. The long end of the story is YES, Oregon does by statute recognizes internal liability shield for owners / members of an LLC. So even though Oregon does not have a Series LLC, the state of Oregon does recognize internal liability shields. see OR statute below to be comforted.

ORS 63.165(1)(2)

(1)the debts, obligations, and liabilities of LLC, whether arising in contract, tort or otherwise, are SOLELY the debts, obligations and liabilities of the LLC. A member or manager is NOT PERSONALLY LIABLE for a a debt, obligation or liability of the LLC solely by reason of being or acting as a member or manager.

(2)The failure of a LLC to observe the usual formalities or requirements relating the exercise of its LLC powers or management of its business is NOT a ground for imposing personal liability on the members or managers for liability of the LLC. [1993 c. 173 section35; 1999 c.86 section 10.]

The same goes for Washington State. See RCW 25.15.126. Though Washington State does not have a statutory Series LLC to create in the state, it does recognize the internal liability shield offered by LLCs on its members.

So, though Washington does not have a Series LLC, the State of Washington does recognize the internal liability shield principle, and that is what the courts would be looking at if you created an out of State Series LLC lets say in TX or NV or DE, and owned a property in WA and were sued in WA. The personal liability shield of the Series LLC would still be upheld so long as its formalities were followed. Just like a standard LLC.

Just finished a Continuing Legal Education Course (CLE) specifically for Series LLC. Some really great updated info. For example, 17 states now have Series LLC. Should see 20 by next year.

ALOS, FL now recognized the Series LLC and will uphold another states Series LLC.

Also, Know which states require Notice for Series LLC. Some states like IL requires customers to be on notice to uphold the Series. Know what the state you created your series in what their notice laws are. An good example and practice of Notice for Series LLC's is: Leases should say "ABA, LLC – Series A" (this is the name of the company the tenant is contracting with. Same with vendor contractors, etc.

And, don't forget that when you create your Series LLC, just like any LLC, you MUST elect how yo are going to be taxed by the government. Partnership, SCorp, etc. Don't forget to talk to your CPA about what to elect.

Just to put perspective of the misconception of the Series LLC being a new entity, it is not. It was first created in 1996 in Delaware. 22 years ago. The traditional LLC first became available in Wyoming in 1977, but most other states did not follow suit until the 1990s). The next state was Delaware in 1991 to enact the LLC. In 1994/5 CA. It was not until 1996 that all states had a LLC. The same year the Series LLC was statutorily crested. So it’s interesting how people quickly fall in love with the traditional LLC thinking it’s been around forever but fairly after the creation of the LLC in most states, the series LLC immediately came in the game. In fact just one year after CA codified the traditional LLC. Just a quick timeline of history and the LLC relating to the misconception of the “novelty” of the Series LLC.

Have you seen any conversation regarding Oregon allowing a Series LLC?

@Cody Cox not yet. I was going to talk to some state legislatures now to see what we can do to have Oregon revise their LLC statute for Series LLC. In regards to Series LLC's and states that recognize them or not, the issue comes down to each specific state recognizing the "internal liability shield." Not if thy have a Series LLC to create in that state or not. For the State of Oregon recognizing internal liability shield. The long end of the story is YES, Oregon does by statute recognizes internal liability shield for owners / members of an LLC. So even though Oregon does not have a Series LLC, the state of Oregon does recognize internal liability shields. see OR statute below to be comforted. ORS 63.165(1)(2) (1)the debts, obligations, and liabilities of LLC, whether arising in contract, tort or otherwise, are SOLELY the debts, obligations and liabilities of the LLC. A member or manager is NOT PERSONALLY LIABLE for a a debt, obligation or liability of the LLC solely by reason of being or acting as a member or manager. (2)The failure of a LLC to observe the usual formalities or requirements relating the exercise of its LLC powers or management of its business is NOT a ground for imposing personal liability on the members or managers for liability of the LLC. [1993 c. 173 section35; 1999 c.86 section 10.] So, though Oregon does not have a Series LLC, the State of Oregon does recognize the internal liability shield principle for LLCs, and that is what the courts would be looking at if you created an out of State Series LLC lets say in TX or NV or DE, and owned a property in OR or any other state that does not yet have the Series LLC and were sued in OR or that state. The personal liability shield of the Series LLC would still be upheld so long as its formalities were followed. Just like a standard LLC. I know you invest in OH property notes a lot. The good thing is OH does recognize and codified their own Series LLC when they revised their LLC Statute.

Awesome information. We are still way overdue on having coffee together. What are your thoughts on having a periodic meeting of the folks involved in this group?

@Cody Cox we are way overdue for coffee. I get back in town next week. IM me and lets set a day. I think a periodic meeting for this group is a great idea. I just need some feedback from the participants who are interested and we can try to set a location and time. 

Very exciting. I’m gonna be teaching a national CLE seminar “continuing legal education” for attorneys on asset protection for the national academy of CLE.

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